Analysts: Federal government should cut funding from lowest-performing colleges

The federal government spends billions of dollars a year on higher education but almost never cuts off funding to colleges and universities that struggle to fulfill their mission.

One reason is that policymakers are reluctant to penalize students enrolled in these schools. Another is a lack of consensus on what constitutes the lowest acceptable performance.

On Wednesday, the Education Trust, a group that seeks to close gaps in academic opportunity and achievement, contended in a report that it is time to use federal influence to pressure colleges to meet minimum performance standards.

Last year, President Obama announced that the government would launch by 2015 a federal system of rating colleges on measures of access and value. That initiative is controversial in higher education. Many educators say it is almost impossible to devise a system that fairly takes into account the vast differences among thousands of colleges and universities. They also say that the quality of federal data on colleges is suspect.

But the authors of the Education Trust report, Michael Dannenberg and Mary Nguyen Barry, proposed these standards for each college:

● ● At least 17 percent of the freshman class should be eligible for federal Pell grants, a measure of access for students from low- to moderate-income families.

● At least 15 percent of freshmen who are new to college and taking classes full time should graduate within six years.

● Fewer than 28 percent of former students should default on their student loans.

What do those benchmarks have in common? Each, according to the report, defines the lowest-performing 5 percent of four-year colleges on those measures.

“Regardless of outcomes, nearly all colleges continue to receive taxpayer dollars, year after year after year,” the authors write. “Federal dollars flow to institutions that graduate almost all their students and those that graduate almost none; institutions that serve their ‘fair share’ of students from lower income families, and those that don’t; and institutions whose students graduate with manageable debt and are able to turn their degrees into decent jobs that support loan repayment, as well as institutions whose students carry too much debt and leave with no degree or a worthless one.”

Dannenberg and Nguyen Barry said low performers deserve time and help to meet the standards. “The goal should be to spur institutions to improve, not to shrink or close them,” they said. But the authors argue that the federal government should impose financial sanctions, eventually, on colleges that repeatedly fail to hit the mark. The sanctions could include a loss of federal tax breaks and grants for institutions, and in some instances, a loss of eligibility to participate in federal student aid programs.

On graduation rates, the report lists about 100 schools where the share of first-time freshmen in 2005 who earned a bachelor’s degree by 2011 was below 15 percent. Many were for-profit units of the University of Phoenix or the ITT Technical Institute. Also listed were the public University of the District of Columbia (8 percent), Coppin State University in Baltimore (14.7 percent) and the online University of Maryland University College (10.3 percent). UDC and Coppin State both raised their rates in 2012.

UMUC’s rate fell, but school officials have noted that most of their students are part-timers or are returning to college, which means that they are not counted in the formula. That is an issue that affects graduation rates for many colleges.

On student loan defaults, most of the schools that fell short in the analysis were for-profit colleges. Some were historically black colleges or Hispanic-serving institutions. The federal government already has rules that threaten sanctions for schools with high default rates, but the report contended that those rules are not tough enough.

The Obama administration is seeking new regulations on for-profit colleges, saying the measures are needed to help ensure students are not burdened with debt they cannot repay. For-profit college leaders dispute that assertion.

Many higher education leaders say that a punitive framework is difficult to impose on a market that ranges from for-profit schools to small Bible colleges to global research universities. They also say that the federal government has plenty of authority already to crack down on failing colleges.

Education Department spokeswoman Denise Horn said the agency had no comment on the report.

Nobody wants students to go to low-performing colleges, said Terry W. Hartle, senior vice president of the American Council on Education. But Hartle said: “Simplistic accountability measures usually have very complex and unintended consequences.”